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from Anatole Kaletsky:

Karl Marx was right — at least about one thing

 A board displays the Dow Jones industrials average after the close at the New York Stock Exchange

Confidence in the global economy is steadily improving, as shown in the financial markets’ bullish behavior and confident comments from companies and policymakers over the past few weeks. Though these columns have argued in favor of a robust recovery, when investors get uniformly bullish, the pessimistic case deserves attention.

Many distinguished economists believe that the current improvement in global conditions is just a blip. They insist that the world faces years, if not decades, of “secular stagnation.” How seriously should we take them?

The good news is that there is little evidence of secular stagnation in global statistics. The “new normal” for the world economy since 2008 has not been very different from the pre-crisis period. The average growth of the global economy from 1988 to 2007, the 20 years before the crisis, was 3.6 percent, according to the International Monetary Fund World Economic Outlook database. The IMF latest forecast for 2014 is exactly the same -- 3.6 percent. Though Christine Lagarde, the IMF managing director, hinted at a modest downgrade this week.

International Monetary Fund Managing Director Lagarde addresses the Bretton Woods Committee annual meeting in WashingtonAt first glance, this continuity seems hard to square with the slowdown in economic activity in all major economies since 2008. The IMF expects only 2.2 percent growth this year in the developed countries, compared with an average of 2.8 percent during the two decades before the crisis. In the emerging economies, meanwhile, growth is projected at 4.8 percent this year, slightly below the average of 4.9 percent of the pre-crisis decades.

from Breakingviews:

Biggest risk of geopolitics is as a distraction

By Edward Hadas

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Investors consider geopolitics the most important risk to financial markets over the next year. That judgment, reported in a Barclays survey this week, shows people taking greater cues from headlines than numbers.

from Breakingviews:

Blunt instrument is needed for global house bubble

By Ian Campbell

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

House price bubbles thrust economies forward and crush them when they burst. The International Monetary Fund has now raised the prospect of a global housing bubble that could potentially destabilise the world economy. The risk is credible, but the IMF is sadly too coy about the root cause of the problem – ultra-loose U.S. monetary policy.

from Expert Zone:

The reform club

(Any opinions expressed here are those of the author and not of Thomson Reuters)

That custodian of the English language, the Oxford English Dictionary, describes a bubble as “anything fragile, unsubstantial, empty or worthless; a deceptive show”. Could this description apply to the current frenzy for “reform” that is seemingly sweeping the global economy? The answer is “yes, in part”. While there are some genuine attempts at reform, market expectations for reform will inevitably be disappointed in some parts of the world.

The global financial crisis has prompted politicians to advocate economic reform in two ways. First, the crisis demonstrated that the status quo needed to be changed -- and in many cases that change required sizeable structural change. Second, as the structure of the world economy has changed (lower global capital flows, slower global trade, etc.) so economies have had to adapt the way that their economies are structured.

from Expert Zone:

Reflections from Davos

(Any opinions expressed here are those of the author and not of Thomson Reuters)

It’s been an exciting week at Davos. The annual meeting of the World Economic Forum this year was refreshingly different from previous editions. There is a general sense of optimism.

Although the effects of the recent crisis linger on, businesses and business leaders are acknowledging that we are seeing signs of recovery. In Davos, I had conversations with business leaders, heads of industry bodies, as also members of the academic and media fraternity. Each of these conversations resonated optimism.

from MacroScope:

The Bank of Canada is probably not ready to seriously consider cutting rates — yet

With all signs showing the Canadian economic miracle is fading, the Bank of Canada is understandably starting to sound more dovish. The Canadian dollar has got a whiff of that, down about 10 percent from where it was this time last year.

But that doesn't mean Governor Stephen Poloz is ready to signal on Wednesday that his rate shears are about to get hauled out of the shed.

from Expert Zone:

The fear of “L”

(This piece comes from Project Syndicate. The opinions expressed are the author's own)

For the last few years, economists have been running through the alphabet to describe the shape of the long-awaited recovery -- starting with an optimistic V, proceeding to a more downbeat U, and ending up at a despairing W. But now a deeper anxiety is beginning to stalk the profession: the fear of what I call an "L-shaped" recovery.

from MacroScope:

Time to taper the taper talk?

It's been three months since the Federal Reserve first hinted that it's going to have to ease off on its extraordinary monetary stimulus, but financial markets are still not settled on the matter.

But while volatility is on the rise - surely partly a result of thinned trading volumes during the peak summer vacation season - the consensus around when the Fed will start cutting back hasn't budged.

from MacroScope:

Not again, please! Brazil and India more vulnerable now to another crisis

After bad economic news from Germany, China and the United States over the past few weeks, here are two more. Brazil and India, two of the world's largest emerging economies, are increasingly vulnerable to another crisis or to the eventual end of the ultra-loose monetary policies in developed economies after five years of a severe global slowdown.

Weak demand for Brazil's exports and the voracious appetite of local consumers for imported goods widened the country's current account deficit to 2.93 percent of GDP in the 12 months through March, the widest gap in nearly eleven years. In dollar terms, that amounts to $67 billion.

from Global Investing:

Making an Impact may be new good

If the pure pursuit of greed is no longer good in the post-crisis world, what defines the new "good"?

That's when you start to consider "Impact Investing", a type of investment that pursues measurable social and environmental impacts alongside a financial return.  According to a report prepared for the Rockefeller Foundation, approximately 2,200 impact investments worth $4.4 billion were made in 2011.

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